Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales And Use Tax Court Decisions


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C

Cal-Metal Corp. v. State Board of Equalization . . . (1984)

Transfer of Equipment to Commencing Partnership in Exchange for Assumption of Indebtedness Is a Taxable Sale

Appellant transferred equipment to a commencing partnership as a capital contribution, and in return the partnership assumed appellants' liabilities for indebtedness on the equipment. The Board determined that the transaction constituted a taxable sale, and the amount of the sale subject to tax was the full amount of the debt assumed by the partnership. Appellant brought suit for refund, and the trial court granted judgment for the Board.

The court of appeal affirmed. It held that the transaction was a sale because appellant transferred its right, title, and interest in the property to a separate legal entity. The court further held that the Board properly measured the tax by the full amount of the indebtedness assumed by the partnership, because this constituted a valuable consideration received by appellant. Appellant, having elected the benefits of the partnership form of doing business, cannot ignore the disadvantages resulting from its election. Cal-Metal Corp. v. State Board of Equalization (1984) 161 Cal.App.3d 759.